GlobeNewswire Inc | Feb 11, 2021 07:29AM EST

February 11, 2021

MANITOWOC, Wis., Feb. 11, 2021 (GLOBE NEWSWIRE) -- Orion Energy Systems, Inc. (NASDAQ: OESX) (Orion Lighting), a provider of energy-efficient LED lighting, controls and IoT systems, including turnkey project implementation, as well as ongoing system maintenance and program management, today reported results for its FY 2021 third quarter ended December 31, 2020 (Q321). Orion will hold an investor call today at 10:00 a.m. ET details below.

Q3 Financial Highlights Prior Three Quarters$ in millions except Q3?21 Q3'20 Change Q2?21 Q1?21 Q4?20per share figuresRevenue $44.3 $34.2 +$10.0 $26.3 $10.8 $25.9Gross Profit $11.0 $8.3 +$2.7 $7.3 $2.6 $5.8Gross Profit % 24.9% 24.2% +70 bps 27.6% 24.4% 22.3%Net Income (Loss) $4.3 $2.3 +$2.0 $1.9 ($2.2) ($0.5)EPS $0.14 $0.07 +$0.07 $0.06 ($0.07) ($0.02)EBITDA* $4.9 $2.8 +$2.0 $2.3 ($1.7) $0.0Cash & Equivalents $12.3 $13.8 -$1.5 $12.1 $10.8 $28.8*EBITDA reconciliation table below.

Highlights

-- Q321 revenue grew to $44.3M from $34.2M in Q320, demonstrating a rapid rebound in major account activity, and also exceeded Q221 revenue of $26.3M. The Q321 performance improvement reflects a full quarter of business activity following COVID-19-related disruptions that commenced in March 2020 and continued primarily through August 2020. -- Q321 revenue included previously delayed turnkey LED lighting retrofit activity for a major national account project that resumed in early August, in addition to significant contribution from a national retrofit project for a specialty retail customer. -- Q321 gross profit percentage increased to 24.9% from 24.2% in Q320, primarily because of improvement in product margin partially offset by increased service revenues which have lower margins, but declined sequentially from 27.6% in Q221primarily because of a change in customer mix and start-up costs related to the national specialty retail customer project. -- Q321 operating expenses increased to $6.5M versus $5.8M in Q320 and $5.4M in Q221, principally reflecting higher sales commissions on increased revenue, incremental costs required to support higher revenues, as well as start-up costs associated with the Companys new maintenance services business. -- Orions EBITDA improved to $4.9M in Q321, compared to $2.8M in Q320 and $2.3M in Q221. -- Orion ended the quarter with $23.3M in working capital, including $12.3M of cash and had no amounts drawn on its credit facility. In December, Orion secured a new five-year$25.0 millionrevolving credit facility withBank of America. The facility provides a 25% increase in financing capacity and liquidity to support the execution of the Companys strategic growth plans. -- Excluding any significant COVID-19 business impacts, Orion continues to anticipate FY 21 revenue of at least $117M and FY 22 revenue that should at least match its record results achieved in FY 20.

CEO CommentaryMike Altschaefl, Orions CEO and Board Chair, commented, "As anticipated, our business rebound accelerated in Q321 with both existing and new customers returning to pre-COVID-19 levels of activity, along with a growing pipeline of opportunities. We are seeing significant opportunities in a number of our markets, including national retailers, global online retailers, warehousing and logistics, automotive, healthcare and the public sector.

Product development continues to play an important role in Orions success as we are experiencing very solid demand for new product lines introduced over the past year. Our new Starline high-bay LED fixture line has been very well received by customers and partners due to its efficient, cost-effective design and energy efficiency. We are also having good success with a new exterior lighting product line that delivers more efficient illumination than comparable products, and we are launching some next generation linear LED fixtures later this month. As always, Orion remains focused on innovative product designs that deliver performance, value and customized solutions for our customers while also incorporating design, production and sourcing efficiencies that provide opportunities for margin enhancement. For example, earlier this week, Orion announced a licensing and exclusive manufacturing agreement with Go Fan Yourself (GFY).Orion will utilize GFYs patented technology incorporating UVC into air movement products.UVC has been proven effective in killing airborne viruses,including COVID-19, as well as bacteria, fungi and other germs.These products will join Orions existing line of LED lighting fixtures, which utilize antimicrobial LEDs in the 405 nanometer wavelength to reduce surface growth of bacteria, fungi, mold and mildew, as Orion builds on its healthy, safe and sustainable solutions.

A growing number of large national account customers are recognizing the value of Orions unique, customized, turnkey LED lighting capabilities and our proven track record in executing large national installation programs with efficient, high-quality service. Our sales team is very active in leveraging this capability to develop new large customer prospects for our lighting systems and services. Though the sales cycles can be longer for such large opportunities, we feel confident in the broad array of benefits our systems can deliver, ranging from improved illumination, enhanced work environments and greater safety, along with the environmental and cost benefits delivered by state-of-the-art LED lighting and controls. Building off this value proposition we are also excited by the potential of products incorporating UV and violet light technologies to help our customers address environmental safety concerns around germs, bacteria and viruses.

Reflecting these and other factors, we are confident in our business outlook going forward, tempered only by the real potential for COVID-19 concerns to impact our customers plans and our operations. Although we have put in place rigorous safety protocols to reduce the risks of COVID-19 impacts to our business, there are many circumstances that are outside our control and so COVID-19 remains a significant risk to our future performance.

Business OutlookOrion expects to achieve FY 21 annual revenue of at least $117M, implying $80M of revenue will be generated in the second half, though more weighted to the third quarter. Orion believes it is well positioned and expects to achieve financial results in FY 22 that should at least match those delivered in FY 20. In FY 20, Orion achieved record revenue of $151M and net income of $12.5M, or $0.40 per diluted share. Orions FY 22 outlook, which assumes no material negative COVID-19 impacts, is supported by the following factors:

-- Orion anticipates significant additional product and service revenue from an existing large national retail customer for the retrofit of additional locations, new construction, outdoor lighting and other projects. -- Orion expects to generate significant revenue from custom-designed luminaires for a global online retailers new facilities. -- Orion has completed several initial facilities for a global logistics industry customer that is expected to be a significant source of additional revenue, on a project-by-project basis. -- Orion has been selected by another leading global logistics provider to be their primary LED lighting supplier and project manager in North America, also on a project basis. This relationship is expected to be a meaningful source of new revenue. -- Orion expects to continue the LED lighting retrofits for a national specialty retailer. -- Orions existing automotive customers are likely to provide a number of project opportunities. -- Orion is seeing significant opportunities in the healthcare market. -- Orion anticipates continued steady demand from long-standing public sector customers, including the U.S. Military, the Veterans Administration and the U.S. Postal Service. -- Orion is experiencing a solid rebound in interest and business activity within its energy service company (ESCO) and electrical contractor distribution channels, where its new products are resonating, and more companies appear willing to proceed with retrofit and new construction projects. -- Companies are increasingly engaged in pursuing green, cost saving projects that exhibit strong ROI, many of which had been on hold due to COVID-19. -- Orion has recently launched new LED lighting products, including outdoor fixtures and linear products that have been designed to deliver superior quality and energy efficiency at attractive pricing. These products are expected to support revenue growth opportunities in FY 22 and beyond.

Orion cautions investors that this outlook involves uncertainty due to the COVID-19 pandemic and possible business and other economic impacts.

Financial ResultsOrions Q321 revenue improved to $44.3M compared to $34.2M in Q320 and $26.3M in Q221, as business activity rebounded rapidly following COVID-19 related impacts. During Q321, Orion was again fully engaged in installations for a large national retail customer and another national account project, with minimal COVID-19 impacts. Q321 product revenue increased to $31.9M from $25.9M in Q320 and service revenue increased to $12.3M from $8.4M, principally reflecting installation and services for national accounts.

Gross profit percentage increased to 24.9% in Q321 from 24.2% in Q320, primarily because of improvement in product margin partially offset by increased service revenues which have lower margins, but decreased sequentially from Q2 21 because of a change in customer mix and higher costs related to the start of a national account project during the quarter.

Total operating expenses increased to $6.5M in Q321 from $5.8M in Q320 and $5.4M in Q221, due primarily to the impact of sales commissions on higher revenue, as well as start-up costs related to the Companys new maintenance services business.

Orion generated EBITDA of $4.9M in Q321 versus $2.8M in Q320 and $2.3M in Q221. Q321 net income improved to $4.3M, or $0.14 per diluted share, compared to net income of $2.3M, or $0.07 per diluted share in Q320 and $1.9M, or $0.06 per diluted share, in Q221, reflecting relatively higher revenue covering fixed expenses.

Cash Flow & Balance SheetOrion generated $8.5M of cash from operating activities in Q321 as compared to $5.8M in Q320. The increase was due to higher net income adjusted for changes in working capital.

As of December 31, 2020, Orions net working capital balance increased to $23.3M, including $12.3M in cash and cash equivalents, as compared to net working capital of $19.4M at December 31, 2019. Orion had no balance outstanding on its revolving credit facility and$25.0Mof availability on the facility as of quarter end.

Webcast/Call Detail

Date / Time: Thursday, February 11th at 10:00 a.m. ET (9:00 a.m. CT)Call Dial-In: (877) 754-5294 or (678) 894-3013 for internationalWebcast/ https://edge.media-server.com/mmc/p/mzc7jnupReplay:Audio Replay: (855) 859-2056, ID#5357316 (available shortly after the call through 2/18/21)

About Orion Energy SystemsOrion provides innovative LED lighting systems and turnkey project implementation including installation and commissioning of fixtures, controls and IoT systems, as well as ongoing system maintenance and program management. We help our customers achieve energy savings with healthy, safe and sustainable solutions, enabling them to reduce their carbon footprint and digitize their business.

Non-GAAP MeasuresIn addition to the GAAP results included in this presentation, Orion has also included the non-GAAP measures, EBITDA (earnings before interest, taxes, depreciation and amortization). The Company has provided these non-GAAP measures to help investors better understand its core operating performance, enhance comparisons of core operating performance from period to period and allow better comparisons of operating performance to its competitors. Among other things, management uses EBITDA to evaluate performance of the business and believes this measurement enables it to make better period-to-period evaluations of the financial performance of core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and Orion compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurement. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with generally accepted accounting principles.

Consistent with Regulation G under the U.S. federal securities laws, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measures, and this reconciliation is located under the heading Unaudited EBITDA and Adjusted EBITDA Reconciliation following the Condensed Consolidated Statements of Cash Flows included in this press release.

COVID-19 ImpactsThe COVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets, in the U.S. and globally. Orions business has been materially adversely impacted by measures taken by government entities and others to control the spread of the virus. As part of the Companys recent response to the impacts of the COVID-19, management has taken a number of cost reduction and cash conservation measures. While restrictions have begun to lessen in certain jurisdictions, stay-at-home, face mask, and lockdown orders remain in effect in others, with employees asked to work remotely if possible. Many customers and projects require Orion employees to travel to customers and project locations. Some customers and projects are in areas where travel restrictions have been imposed, certain customers have either closed or reduced on-site activities, and timelines for the completion of multiple projects have been delayed, suspended, or extended. As of the date of this release, it is not possible to predict the overall impact the COVID-19 pandemic will have on the Company's business, liquidity, capital resources or financial results.

Safe Harbor Statement Certain matters discussed in this press release, including under the headings Highlights, CEO Commentary, and "Business Outlook" are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements will include words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "would" or words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause results to differ materially from those expected, including, but not limited to, the following: (i) our ability to achieve our expected revenue and other financial objectives in FY 21 and beyond, particularly as a result of the COVID-19 pandemic; (ii) our recent and expected continued reliance on revenue generated from the retrofit of a single or few national account projects; (iii) our ability to achieve profitability and positive cash flows; (iv) our levels of cash and our borrowing capacity under our revolving line of credit; (v) the availability of additional debt financing and/or equity capital; (vi) our lack of major sources of recurring revenue, our dependence on a limited number of key customers, and the potential consequences of the loss of one or more key customers or suppliers, including key contacts at such customers; (vii) our risk of potential loss related to single or focused exposure within the current customer base and product offerings; (viii) our ability to manage the ongoing decreases in the average selling prices of our products as a result of competitive pressures in the evolving LED market; (ix) our ability to differentiate our products in a highly competitive market, expand our customer base and gain market share; (x) our ability to manage our inventory and avoid inventory obsolescence in a rapidly evolving LED market; (xi) our ability to adapt to increasing convergence in the LED market; (xii) the reduction or elimination of investments in, or incentives to adopt, LED lighting technologies; (xiii) our increasing ongoing attempts to sell more of our products through third party distributors and sales agents, including our ability to attract and retain effective third party distributors and sales agents to execute our sales model; (xiv) our ability to develop and participate in new product and technology offerings or applications in a cost effective and timely manner; (xv) the potential deterioration of market conditions, including our dependence on customers' capital budgets for sales of products and services, and adverse impacts on costs and the demand for our products as a result of the implementation of tariffs; (xvi) our increasing reliance on third parties for the manufacture and development of products and product components; (xvii) our ability to maintain safe and secure information technology systems; (xviii) our failure to comply with the covenants in our revolving credit agreement; (xix) our fluctuating quarterly results of operations; (xx) our ability to recruit, hire and retain talented individuals in all disciplines of our company; (xxi) our ability to balance customer demand and production capacity; (xxii) our ability to maintain an effective system of internal control over financial reporting; (xxiii) price fluctuations (including as a result of tariffs), shortages or interruptions of component supplies and raw materials used to manufacture our products; (xxiv) our ability to defend our patent portfolio; (xxv) a reduction in the price of electricity; (xxvi) the cost to comply with, and the effects of, any current and future industry and government regulations, laws and policies; (xxvii) the sale of our corporate office building which will likely result in a non-cash impairment charge; and (xxviii) potential warranty claims in excess of our reserve estimates and (xxviii) the other risks described in our filings with the Securities and Exchange Commission. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://investor.oriones.com/ in the Investor Relations section of our Website.

Twitter @OrionLighting and @OrionLightingIRStockTwits: @Orion_LED_IR

Investor Relations Contacts

Per Brodin, CFO William Jones; David CollinsOrion Energy Systems, Inc. Catalyst IRpbrodin@oesx.com (212) 924-9800 or OESX@catalyst-ir.com

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except share amounts)

December March 31, 31, 2020 2020Assets Cash and cash equivalents $ 12,279 $ 28,751 Accounts receivable, net 23,744 10,427 Revenue earned but not billed 1,519 560 Inventories, net 18,518 14,507 Prepaid expenses and other current assets 607 723 Total current assets 56,667 54,968 Property and equipment, net 11,410 11,817 Other intangible assets, net 2,033 2,216 Long-term accounts receivable 652 760 Other long-term assets 2,906 2,802 Total assets $ 73,668 $ 72,563 Liabilities and Shareholders? Equity Accounts payable $ 19,360 $ 19,834 Accrued expenses and other 13,916 7,228 Deferred revenue, current 126 107 Current maturities of long-term debt 14 35 Total current liabilities 33,416 27,204 Revolving credit facility ? 10,013 Long-term debt, less current maturities 39 50 Deferred revenue, long-term 659 715 Other long-term liabilities 3,768 3,546 Total liabilities 37,882 41,528 Commitments and contingencies Shareholders? equity: Preferred stock, $0.01 par value: Sharesauthorized: 30,000,000 atDecember 31, 2020 and March 31, 2020; no shares ? ? issued and outstanding atDecember 31, 2020 and March 31, 2020Common stock, no par value: Shares authorized:200,000,000 at December 31, 2020 and March 31,2020; shares issued: 40,227,900 at December 31,2020 and ? ? 39,729,569 at March 31, 2020; shares outstanding:30,759,953 atDecember 31, 2020 and 30,265,997 at March 31, 2020 Additional paid-in capital 157,262 156,503 Treasury stock, common shares: 9,467,947 at (36,181 ) (36,163 )December 31, 2020 and 9,463,572 at March 31, 2020Retained deficit (85,295 ) (89,305 )Total shareholders? equity 35,786 31,035 Total liabilities and shareholders? equity $ 73,668 $ 72,563

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except share and per share amounts)

Three Months Ended December Nine Months Ended December 31, 31, 2020 2019 2020 2019 Product revenue $ 31,929 $ 25,867 $ 61,890 $ 93,778 Service revenue 12,322 8,382 19,453 31,171 Total revenue 44,251 34,249 81,343 124,949 Cost of product 23,203 19,075 44,834 68,778 revenueCost of service 10,042 6,900 15,605 24,823 revenueTotal cost of 33,245 25,975 60,439 93,601 revenueGross profit 11,006 8,274 20,904 31,348 Operating expenses:General and 3,030 2,662 8,079 8,274 administrativeSales and 3,120 2,735 7,306 8,359 marketingResearch and 391 439 1,230 1,240 developmentTotal operating 6,541 5,836 16,615 17,873 expensesIncome from 4,465 2,438 4,289 13,475 operationsOther income (expense):Other income 12 2 56 22 Interest expense (1 ) (38 ) (51 ) (261 )Amortization of (20 ) (61 ) (142 ) (182 )debt issue costsLoss on debt (90 ) ? (90 ) ? extinguishmentInterest income ? 2 ? 5 Total other (99 ) (95 ) (227 ) (416 )expenseIncome before 4,366 2,343 4,062 13,059 income taxIncome tax 51 39 52 66 expenseNet income $ 4,315 $ 2,304 $ 4,010 $ 12,993 Basic net incomeper shareattributable to $ 0.14 $ 0.08 $ 0.13 $ 0.43 commonshareholdersWeighted-averagecommon shares 30,735,722 30,243,865 30,586,196 30,053,330 outstandingDiluted net $ 0.14 $ 0.07 $ 0.13 $ 0.42 income per shareWeighted-averagecommon sharesand share 31,320,427 30,824,078 31,289,359 30,862,088 equivalentsoutstanding

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)

Nine Months Ended December 31, 2020 2019 Operating activities Net income $ 4,010 $ 12,993 Adjustments to reconcile net income to net cash(used in) provided by operating activities:Depreciation 889 910 Amortization of intangible assets 225 282 Stock-based compensation 611 515 Amortization of debt issue costs 142 182 Loss on debt extinguishment 90 ? Impairment of intangible assets ? 3 Loss on sale of property and equipment 6 ? Provision for inventory reserves 185 192 Other 9 28 Changes in operating assets and liabilities: Accounts receivable, current and long-term (13,208 ) (420 )Revenue earned but not billed (959 ) 2,957 Inventories (4,196 ) 970 Prepaid expenses and other assets 339 44 Accounts payable (304 ) (2,990 )Accrued expenses and other 6,555 (1,296 )Deferred revenue, current and long-term (38 ) (95 )Net cash (used in) provided by operating activities (5,644 ) 14,275 Investing activities Purchases of property and equipment (658 ) (582 )Additions to patents and licenses (43 ) (73 )Net cash used in investing activities (701 ) (655 )Financing activities Payment of long-term debt (32 ) (68 )Proceeds from revolving credit facility 8,000 63,200 Payments of revolving credit facility (18,013 ) (71,572 )Payments to settle employee tax withholdings on (22 ) (76 )stock-based compensationDeferred financing costs (212 ) (91 )Net proceeds from employee equity exercises 152 20 Net cash used in financing activities (10,127 ) (8,587 )Net (decrease) increase in cash and cash (16,472 ) 5,033 equivalentsCash and cash equivalents at beginning of period 28,751 8,729 Cash and cash equivalents at end of period $ 12,279 $ 13,762

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIESUNAUDITED EBITDA RECONCILIATION(in thousands)

Three Months Ended Nine Months Ended December 31, December 31, 2020 2019 2020 2019 Net income $ 4,315 $ 2,304 $ 4,010 $ 12,993 Interest 1 36 51 256 Taxes 51 39 52 66 Depreciation 302 295 889 910 Amortization of 73 94 225 282 intangible assetsAmortization of debt 20 61 142 182 issue costsLoss on Debt 90 ? 90 ? ExtinguishmentEBITDA $ 4,852 $ 2,829 $ 5,459 $ 14,689